Dasa Underperforms Health-Care Peers as Executives Leave

Diagnosticos da America SA (DASA3)’s back- to-back top management changes since January are hurting confidence in Brazil’s biggest provider of medical diagnostics, dragging down shares this year as health-care peers rally.

Dasa, as the Barueri, Brazil-based company is known, fell 24 percent in Sao Paulo trading this year before today, the worst performer among health-care companies, data compiled by Bloomberg show. Amil Participacoes SA (AMIL3), Brazil’s largest health- care insurance provider, has gained 17 percent this year, while dental-plan provider OdontoPrev SA (ODPV3) has climbed 13 percent.

The company’s stock is falling even as rising incomes allow more people to leave Brazil’s public health system, which serves about 75 percent of the population, for private providers. Investors are looking for Dasa to outline its strategy to fuel growth after having seven different chief executive or chief financial officers this year, said Guilherme Assis, an analyst at Raymond James.

“The company is in a more difficult phase now on higher costs due to investments, sales haven’t yet picked up, results are not good,” Assis said in a telephone interview from Sao Paulo. “Investors are looking at those factors, which justify the share drop.”

Falling Profit

Dasa said in an Aug. 13 regulatory filing that second- quarter profit dropped 9.6 percent from a year earlier to 23.1 million reais ($11.4 million), after falling 18 percent in the first three months of the year. Competitor Fleury SA (FLRY3) had a 3 percent drop in profit. Amil posted a 9.7 percent increase, while Odontoprev reported a 21 percent gain in net income.

Costs rose as Dasa hired personnel and invested 49.3 million reais in the quarter, up 34 percent from a year earlier, to revamp units, buy equipment and improve technology, according to the filing.

“We are creating the base for a profitable and sustainable company for coming years,” CEO Dickson Esteves Tangerino said on a conference call on Aug. 14. “We’ll still have some costs in the third quarter related to those in the second quarter, something that won’t happen in the fourth quarter.”

Tangerino took over as CEO in June, replacing Chairman Romeu Cortes Domingues, who had been acting as the interim chief since Marcelo Noll Barboza vacated the post in April. CFO Cynthia May Hobbs was named in June, the latest of four people to occupy the role this year.

Dasa’s press office declined to comment.

No Guidance

“Management isn’t giving guidance,” Josh Milberg, an analyst at Deutsche Bank in Sao Paulo, wrote in an Aug. 15 report. “The issues that hurt second-quarter results have considerably obscured the profitability outlook.”

Dasa will benefit in coming quarters as more people shift to private health-insurance plans, boosting demand for diagnostic services, said Rodolfo Amstalden, an analyst at equity consulting firm Empiricus Research.

“Dasa is investing in training employees, hiring more and better doctors, expanding its call centers,” he said in a telephone interview from Sao Paulo. “Earnings and share prices may still suffer a bit in coming quarters because of these costs, but the company is going in the right direction to win back clients and investor confidence.”

‘Benefit of the Doubt’

The stock rose 2 percent to 12.0S5 reais at 4:14 p.m in Sao Paulo while Fleury fell 1.1 percent, Amil gained 0.7 percent and Odontoprev advanced 0.4 percent. Dasa traded at 27.2 times earnings as of yesterday’s close while Fleury’s ratio is 32.1, data compiled by Bloomberg show.

Analysts have cut their 12-month target price for Dasa by 36 percent since the 2011 peak, data compiled by Bloomberg show. Of the 15 analysts who rate the stock and are tracked by Bloomberg, two recommend selling and seven say hold. At the start of the year, more than half the analysts rated the stock a “buy.”

“The market is not ready to give the benefit of the doubt until results show good improvements,” Raymond James’ Assis said.

To contact the reporters on this story: Katerina Petroff in Sao Paulo at kpetroff@bloomberg.net; Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editors responsible for this story: Jessica Brice at jbrice1@bloomberg.net; Helder Marinho at hmarinho@bloomberg.net

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